NBFCs Q3 Results Preview - In A Healthy Zone, Except For The Visible NIM Compression: Motilal Oswal

Motilal Oswal Report

We expect our coverage universe of non-banking financial companies – lending financials to deliver 13%/8% /15% YoY growth in net interest income/pre-provision operating profit/profit after tax, respectively, in Q3 FY23.

While we forecast a strong QoQ earnings growth for LIC Housing Finance Ltd., we estimate a QoQ decline for Manappuram Finance Ltd. (owing to muted gold loan growth) and Mahindra and Mahindra Financial Services Ltd. (owing to net interest margin compression and higher write-offs).

We expect disbursements to remain healthy across vehicle financing, driven by strong demand and sectoral tailwinds. Vehicle financiers such as Cholamandalam Investment and Finance Company Ltd./Shriram Transport Finance Ltd. are also benefitting from strong momentum in non-vehicle product segments.

We expect a ~16% YoY/~4% QoQ loan growth in Q3 FY23 for our coverage universe. Although the gold loan demand has slightly picked up in the lower ticket size (less than Rs 100,000), the banks/gold loan fintechs and recent NBFC entrants continue to remain aggressive.

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